U.S.-Russia Trade Takes Important Step Forward

Aug 20, 2012

Following the bipartisan approval by the Senate Finance Committee on July 18 of the bill that would establish permanent normal trade relations (PNTR) with Russia by removing the nation from the 1974 Jackson-Vanik Amendment, the House Ways and Means Committee followed suit on July 26 by unanimously approving H.R. 6156, the Russia and Moldova Jackson-Vanik Repeal Act of 2012.

U.S.-Russian trade is governed by Title IV of the Trade Act of 1974, which conditions Russia’s normal trade relations (NTR) status, including the “freedom-of-emigration” requirement of the Jackson-Vanik amendment. The Jackson-Vanik amendment in the U.S. was introduced to prohibit most-favored-nation (MFN) status for non-market economies originally on the basis of human rights concerns. The U.S. has retained the law each year, but has, since 1992, granted a waiver to Russia.

On Dec. 16, 2011, the 153 members of the World Trade Organization (WTO) invited Russia to join the organization, after Russia completed an 18-year accession process. The WTO requires each member to accord newly acceding members “immediate and unconditional” MFN status which is called NTR in U.S. law. Russia is expected to formally join the WTO on Aug. 22 and, in order to comply with the WTO rule, the U.S. would have to change Russia’s status from conditional NTR to unconditional or PNTR.

The change in Russia’s trade status will require legislation to lift the restrictions of Title IV of the Trade Act of 1974 as they apply to Russia and authorize the president to grant Russia PNTR status. On June 12, Senate Finance Committee Chairman Max Baucus (D-Mont.) introduced legislation to remove the application of Title IV to trade with Russia. Some members of Congress raised concerns and felt issues need to be addressed before Congress considers PNTR legislation for Russia, including Russia’s use of sanitary and phytosanitary measures to restrict unnecessarily imports of U.S.-produced meat; week enforcement of intellectual property rights; and government corruption.

Human rights and foreign policy issues also were of concern. As a result, the Senate Finance Committee’s approval of the repeal legislation included new political and human rights sanctions, called the Magnistky bill (S. 1039 and H.R. 4405), formally titled the Sergei Magnitsky Rule of Law Accountability Act of 2012.

Reported out of committee, in a unanimous vote, the Magnistky bill is named for a Russian lawyer who died in detention after trying to expose corruption with the Russian government. The legislation would require the State Department to identify publically individuals responsible for the detention and death of Sergei Magnitsky and other individuals known to have committed human rights violations seeking to expose fraud by Russian government officials. It would require the Secretary of State to deny visas for these individuals to enter the U.S. and for the Secretary of Treasury to freeze the financial assets in and financial transactions with the U.S.

The House and Senate committees approved identical trade measures that would repeal the Jackson-Vanik emigration provision, but there are some differences in their human-rights bills, namely that the Senate's Magnitsky measure is broader and could allow for sanctions on visas and finances on human-rights violators beyond Russia.

Final passage of PNTR with Russia will translate directly into new export sales and jobs here in the U.S. Of the top 15 U.S. trading partners, Russia was the market where American companies enjoyed the fastest export growth last year—38 percent. The President’s Export Council estimates that U.S. exports to Russia—which, according to estimates, topped $11 billion in 2011 — could double or triple once Russia joins the WTO. Meanwhile, the U.S. gives up nothing — not a single tariff — in approving PNTR with Russia.

Since both the House Ways and Means Committee and the Senate Finance Committee approved PNTR legislation by wide bipartisan margins, it is likely Congress will address PNTR soon after they return in September. Lawmakers do not want to risk putting U.S. businesses, workers and farmers at a long-term disadvantage in this important market.